Philippines
Global
Paper invoices are becoming a relic of the past. Because of the ease and convenience that an online electronic invoice (e-invoice) offers, it’s only a matter of time before companies switch to a digitized invoicing system.
In the Philippines, about 7.4 million electronic invoices are now in the Bureau of Internal Revenue’s newly implemented e-invoicing system (EIS), which was launched in July 2022. Initially, the EIS test run involved the country’s 100 largest taxpayers, but EIS targets its implementation for all businesses nationwide.
Learn what an e-invoice is and how it works in this post.
Contents
What is an e-invoice?
An electronic invoice (e-invoice) is a digital billing document from a supplier to a client. It replaces the traditional paper invoice using manual encoding, which is prone to human error that increases costs and processing lifecycles for companies.
The Advantages of Using an E-invoice for Your Business
While current e-invoice systems must address some limitations, the pros outnumber the cons. E-invoices use automated and efficient procedures that deliver better results than manual methods. With e-invoicing, you save time, energy, and money, thanks to these advantages:
Simplify compliance management
E-invoicing simplifies invoice management and brings transparency to your overall system. It also enables the BIR to monitor tax compliance among businesses and consumers, resulting in the payment of correct taxes.
Promote internal and external collaboration
A proper e-invoicing process that aligns your internal operations with each department and supplier helps you create a reliable data repository in a single platform.
Optimize working capital and early-payment discounts
E-invoicing ensures that the bills go out immediately upon order completion, so there is less lag time and faster payments. Electronic invoicing also lessens the possibility of “snail-mail” delays when releasing invoices and collecting receivables.
Reduce fraud and overpayment
Since e-invoice records payments and financial activities, you can trace the company’s every transaction. All transactions come with digital seals and certificates, reducing the chances of someone forging or duplicating documents.
Improve cash flow
Modernizing your payment methods with e-invoice speeds up bill payments and cycle time frames. This strategy can also improve your business’ days sales outstanding (DSO) or the days it takes to convert due credit into cash. It should go without saying that a faster DSO gives you better control of the company’s cash flow.
BIR E-invoicing Requirements
The BIR is the implementing agency of the country’s e-invoice project: the EIS. One of its components entails delivering an invoice report to the BIR platform after sending the invoices to your clients.
Here are the e-invoicing requirements by the BIR:
- Issuing electronic receipts or invoices instead of manual receipts and invoices is mandatory for goods and services exporters, e-commerce business owners, and those considered large taxpayers’ services (LTS).
- These categories of taxpayers should register the following and get a BIR sticker upon completing the inspection:
– The computerized accounting system they use for generating electronic receipts and invoices
– Their cash register machines or point-of-sale systems
– Their certified sales data transmission systems, which will deliver electronic receipts or invoice data to the EIS
Taxpayers using the EIS must also abide by these guidelines:
- The sales data transmission system must be based on the standard API (application programming interface) guidelines.
- Companies covered by the EIS must register in the electronic invoicing or receipt system
to ensure the security of business transactions. - After developing their sales data transmission system, the next step is to have the BIR certify it. Once approved, the BIR will send the EIS certification.
- Transmitting invoice data requires prior approval from the BIR. The goal is to submit the data in real time or within three (3) calendar days of the transaction date.
Once the company receives the BIR’s approval to transmit data, it must submit its sales reports for transactions the following day.
- Electronic receipts or electronic invoice data for submission to the BIR must be in JavaScript Object Notation format.
- Transmitting sales data to the BIR’s EIS requires the summary lists of purchases and importations.
E-Invoicing: Are You Ready?
The next few years will be a period of adjustment for e-invoicing. But again, it’s a worthy effort considering how the system can simplify compliance, collaboration, and communication processes for your company and the BIR.
If you want to learn more about e-invoicing and BIR online filing or want to scale your company’s accounting, bookkeeping, and finance functions, contact CloudCfo today.
